Netflix has now become the world’s largest online video streaming service, with steadily growing subscription rates prompting many traders to open buy positions on its stock. Recently, Netflix published better-than-expected earnings, beating analysts’ pre-release consensus, and improving profitability with its share price up around 60% this year. So, should you also jump on the bandwagon and include Netflix stock in your trading portfolio?
The company recorded global revenue growth of 33% YOY for the 3rd quarter after adding 5.3 million subscribers, including 4.45 million from non-U.S. markets. This was up from 3.2 million in Q3 2016. According to Netflix CFO David Wells, this rise in revenue is mainly due to higher pricing plans: the monthly cost of the company’s most popular plan (up to 2 screens) has been raised from $9.99 to $10.99. The premium service (up to 4 screens) is now $13.99, up from $11.99.
At the same time, the broadcast of original Netflix productions, such as 13 Reasons Why, Orange is the New Black, Narcos, House of Cards, Stranger Things, and The Crown, have helped to attract new subscribers and retain existing customers. However, the company believes it still needs to improve its overall range of content to attract more users, and to offer localised entertainment options for each country and region.
Netflix’s growth is mainly attributable to international markets, since the U.S. market is very close to saturation. For this reason, it’s important for Netflix to produce more original content and programming in more languages, such as Las Chicas del Cable for the Spanish market, O Mecanismo in Brazil, Dark and Dogs of Berlin for Germany, and Marseilles and Osmosis for the French market.
The company recently announced that it would spend about $8 billion on programming next year – up from $6 billion this year – with a target of releasing “about 80 movies”. This boost to the company’s content budget comes as competitors such as Amazon, Apple, and Facebook are developing their own platforms and looking to buy in extensive slates of original shows and movies.
Netflix keeps on delivering impressive subscriber growth, and with international markets finally proving profitable, the company’s stock price looks set to maintain its upward momentum, offering a wealth of trading opportunities.
Many investors, however, choose to wait for a rising stock to ‘catch its breath’ before opening buy positions. Use stock brokers such as the UFX.com stock trading platform to take advantage of Netflix’s future price movements, as this stock is certainly ‘one to watch’.